Employment Law Partner Natalie Abbott explains how a settlement agreement can help you move forward with certainty and financial security.
What is a settlement agreement?
A settlement agreement is a legally binding, voluntary agreement. It brings an employment relationship to an end on agreed terms. They’re often proposed by employers to avoid disputes, formal procedures, or tribunal claims.
Employees can also raise the possibility of a settlement agreement. This is typically done where the working relationship has broken down irretrievably.
Before taking any steps, it’s critical to understand your position. A settlement agreement is only valid if you’ve taken independent legal advice. Once signed, you’re usually giving up your right to bring future legal claims against your employer. Therefore, early advice from a specialist employment solicitor is essential.
Why might an employer agree to a settlement agreement you propose?
If approached appropriately, many employers are open to settling matters amicably. Common reasons an employer may agree include:
• They wish to avoid the stress, cost, and publicity of an employment tribunal
• They want a quick and confidential resolution rather than a prolonged management or disciplinary process
• They recognise there is an underlying dispute and are willing to negotiate a financial settlement
For employers, settlement agreements can offer a pragmatic way forward.
What are the advantages of a settlement agreement if you’re an employee?
For employees, a settlement agreement can be the least disruptive and most controlled way forward. Potential benefits include:
• Leaving an unsatisfactory role without the ordeal of a tribunal claim
• Keeping the circumstances of your exit private
• Receiving a pre agreed lump sum payment, giving you financial breathing space
• Negotiating additional terms such as:
o A standard or agreed reference
o An agreed termination date
o Payment in lieu of notice or accrued benefits
For many people, this certainty is invaluable when planning their next steps.
When might a settlement agreement be appropriate?
There are many situations where asking for a settlement agreement may be appropriate, including:
• Disputes over pay, holiday, or sick pay, where an agreed resolution may avoid escalation
• Being moved into a new or unsuitable role following restructuring
• Feeling forced out of your role due to a serious breach of contract
Settlement agreements can sometimes resolve disputes without ending employment.
Can a settlement agreement help resolve a personality clash at work?
Yes, sometimes.
Where a personality clash impacts a team negatively, a settlement agreement may provide a solution. However, employers can be wary about using settlement agreements as a substitute for good management.
If you’re considering this approach, you must be able to show your conduct was professional and reasonable. Tailored legal advice can make a real difference to how a proposal is received.
Is it risky to ask for a settlement agreement?
This is one of the most common concerns employees have.
Approaching your employer in the wrong way, or at the wrong time, can potentially worsen your position at work. Don’t raise the issue without first understanding whether it’s appropriate and how to protect yourself.
Taking legal advice early allows you to:
• Assess whether a settlement agreement is realistic
• Decide how and when to raise it
• Avoid action that could unintentionally weaken your position
• Understand what you might reasonably negotiate
With the right guidance, many employees find the conversation is far safer and more constructive than they feared.
How to approach your employer for a settlement agreement – advice from an employment lawyer
Before speaking to your employer, seek advice from specialist employment solicitors like ourselves. They can help you weigh up your options, understand any alternatives, and plan the safest strategy.
We advise employees who have raised a grievance – or found themselves sidelined after a restructuring – regularly. A carefully handled request for a settlement agreement can result in compensation, a reference and clarity.
If you’re considering asking for a settlement agreement, speak to a solicitor early on.
Our experienced and supportive employment lawyers can offer confidential advice. We can discuss how to raise a settlement agreement safely, and what terms you could reasonably seek.
Contact us on 03456 465465 or email enquiries@rotherabray.co.uk
Disclaimer: This blog is for information only and does not constitute legal advice. If you need legal advice, please contact us on 03456 465 465 or email enquiries@rotherabray.co.uk to get tailored advice specific to your circumstances from our qualified lawyers.
